Household willingness to pay for improving electricity services in Sumba Island, Indonesia: A choice experiment under a multi-tier framework

Abstract

Global efforts to improve electricity access in developing countries need to go beyond the simple measurement of electrification rates to address the quality of electricity supply. Households' preferences and willingness to pay (WTP) for electricity supply is important information for policy makers, utility companies, and other stakeholders to plan investment in power infrastructure, design business models, and tackle energy-related social equality issues. However, the existing literature is largely focused on consumers' attitudes towards green electricity, while preferences for improving the quality of electricity supply have not been fully researched, especially in the context of deprived areas in developing countries. Based on the World Bank's Multi-Tier Framework (MTF) for measuring energy access, this study conducted a Choice Experiment on the “Iconic Island” of Sumba in Indonesia to investigate households' preferences for four attributes of electricity access: daily supply hours, frequency of unplanned power-cuts, power capacity of using medium/high-power appliances, and monthly electricity fees. The results reveal that reduction of power-cuts, the most studied attribute of power supply in previous studies, is less significant than other attributes in Sumba. Households connected to the main-grid show higher WTP for improving electricity supply than off-grid households. Heterogeneity in households' preferences is significantly associated with gender, age, education level and household income. We discussed policy implications for penetration of renewable energy, prioritising electrification investment and designing service-based electricity tariffs. We also demonstrated the potential for further application of choice experiment results with the MTF of energy access.